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Leaseholds to be banned on most new homes in England

New measures announced to cut out unfair and abusive practices within the leasehold system, including a ban on leaseholds for almost all new build houses in England.

Leaseholds are to be banned for almost all new homes built in England under a new measure aimed at cutting out unfair and abusive practices that have left owners unable to sell their properties.

Communities Secretary Sajid Javid said that the move is part of action to deliver a fairer, more transparent system for home owners to help fix the broken housing market and build a Britain fit for the future.

The announcement comes at the end of a consultation period in which there was an overwhelming response in favour of Government plans to tackle the unfair practices in the leasehold sector.

Leaseholds used to be in place only for flats but in recent years developers have increasingly sold houses on a leasehold basis and it was revealed that leasehold costs would escalate, in some cases doubling every decade, and developers were even selling on the leaseholds to investors who then demanded huge sums when owners asked to buy the freehold.

The only exemption from the new rules will be properties that have shared ownership services and changes will also be made so that ground rents on new long leases, for both houses and flats, are set to zero.

The Government will also make it cheaper and easier for existing leaseholders to buy out their freehold and there will be better information available about redress for those consumers who face the most onerous terms.

‘It’s unacceptable for home buyers to be exploited through unnecessary leaseholds, unjustifiable charges and onerous ground rent terms. It’s clear from the overwhelming response from the public that real action is needed to end these feudal practices,’ said Javid.

Measures to be introduced include legislating to prevent the sale of new build leasehold houses except where necessary such as shared ownership and making certain that ground rents on new long leases are set at zero.

The Government will also work with the Law Commission to support existing leaseholders and make the process of purchasing a freehold or extending a lease much easier, faster and cheaper

Leaseholders will be provided with clear support on the various routes to redress available to them, there will be a wider internal review of the support and advice to leaseholders to make sure it is fit for purpose in this new legislative and regulatory environment and measures to make sure leaseholders have equivalent rights to leaseholders to challenge unfair service charges

Javid said he will be writing to all developers to strongly discourage the use of Help to Buy Equity loans for the purchase of leasehold houses in advance of legislation and to ask those who have customers with onerous ground rent terms to provide necessary redress.

Department for Communities and Local Government statistics estimate there were 4.2 million residential leasehold dwellings in England in the private sector in 2015 to 2016 and of these 1.4 million were leasehold houses. This was a rise on the previous year when in 2014 to 2015, there were 1.2 million leasehold houses.

Thousands of owners are thought to be trapped in homes they cannot sell because of such leasehold measures. In one example in Bolton the charges on a £200,000 property were expected to hit £10,000 a year by 2050.